The H.R. 1,  the “American Recovery and Reinvestment Act of 2009″ -  $780 billion stimulus package was signed into law February 17, 2009.
 
These are the most important features of the tax credit:

• The tax credit amount is increased to $8,000  (from lesser of 10% of cost of home OR $7,500)

• The credit applies only to first-time homebuyers AND homebuyers who did not own a principal residence in 3 (three) years previous to the 2009 purchase

• The credit applies only to the principal residence - any single family residence (including condos, co-ops, townhouses, mobile homes, and boats if the boat is used as principal residence) that will be used as a principal residence by the purchaser

•  The $8,000 tax credit applies only to homes purchased from January 1, 2009 to December 1, 2009.

• The tax credit can be claimed on a tax return to reduce the income tax liability

• This is a true tax credit and does NOT have to be repaid by 2009 purchasers.

• Buyers must keep the house for at least 3 (three) years, as a safeguard against investors and speculators

• If the tax credit is claimed on the tax return, but the house is held for LESS than 3 (three) years, the tax credit will have to be repaid to the IRS from the sale proceeds

• This a true tax credit. It reduces or eliminates income tax liability for the 2009 year of purchase.

• The tax credit is refundable. If any credit amount remains unused (difference between the amount used and $8,000), the unused amount will be refunded by IRS as a check to the purchaser. The amount of the refund is computed as part of the 1040 tax return filing.

• Full  amount of the $8,000 tax credit is available for individuals with adjusted gross income of no more than $75,000 ($150,000 on a joint tax return).  Partial credit available for income above $75,000 ($150,000 for joint tax returns) - for details contact your tax accountant.

• The $7,500 tax credit on qualified purchases on or after April 9, 2008 and before January 1, 2009  must be repaid (6.67% of credit or $500) each year for 15 years, starting with 2010 tax filing - the $7,500 tax credit is in essence an interest-free loan, it is NOT a true tax credit.

6 Key Facts About the First-Time Buyer $7,500 Tax Credit - Credit ends July 1-2009

The $7,500 home ownership tax credit that the federal government created earlier this year as part of the Housing and Economic Recovery Act (H.R. 3221) is another tool to encourage potential buyers to jump off the fence and get into the real estate market.
When you combine the tax credit with today’s low interest rates, wide selection of for-sale inventory, and affordable home prices, many of the pieces are in place for home buyers to buy now. This is how the credit works and why it would help the home buyers.

1. Buyers have until July 2009 to make a purchase that qualifies.
The tax credit was passed in July of 2008 as part of the Housing and Economic Recovery Act (H.R. 3221). It’s worth up to $7,500 and can be taken in a single tax year. Authorization for the credit ends July 1, 2009, so if your customers wait to buy in the first half of 2009 they can take the credit on their 2009 tax return. Taxpayers can take the credit on their 2008 tax return if they bought their house this year after April 9.

2. Buyers don’t really have to be “first-timers.”
The tax credit is actually available to any individual or household that hasn’t owned a home for at least three years. And the NATIONAL ASSOCIATION OF REALTORS® has asked Congress to expand the credit to all buyers, not just those who haven’t owned a primary residence in recent years.

3. Even if buyers exceed the income limit, they can benefit from the credit.
The actual credit amount is set as a percentage of the home purchase amount. That percentage amount is 10 percent, so home buyers can get 10 percent of the home price credited against their tax liability, up to a maximum $7,500. Sounds like a great deal. But what if home buyer makes more money than the income limit of $75,000 for individuals and $150,000 for households? Good news: Individuals whose income exceeds the $75,000 limit but don’t make more than $95,000 can still take the credit but on a reduced basis. The same thing applies to households earning up to $170,000. By the way, any house is eligible as long as it’s a primary residence and is in the United States.

4. Think of it as an interest-free loan.
The federal government requires the tax credit to be paid back in small, 6.67-percent increments over 15 years, although repayment will be no more than $500 yearly and payments will not start until 2011. For that reason, some analysts have likened the credit to a 15-year, interest-free loan to help make home buying affordable. NAR is pushing congress to remove the repayment provision, making this tax credit a true tax credit rather than an interest-free loan.

5.  You don’t have to be authorized before making a home purchase.
There is no pre-purchase authorization, application, or other approval process. Eligible buyers simply have to claim the credit on their IRS Form 1040 tax return and/or any form that the IRS might devise.

6. New-home construction qualifies.
For a home that a buyer constructs, the purchase date is the first date the buyer occupies the home. However, any home that is not a primary residence, such as a vacation home or income property, does not qualify.

NAR Asking Congress to Expand Credit
As mentioned above, NAR has asked Congress to do away with the repayment provision of the first-time buyer tax credit and expand the credit to all home buyers, not just first-timers. The proposals